The wait is over; well sort of. In March 2014 President Obama directed the US Department of Labor (“DOL”) to review the so-called “White Collar” exemptions under the Fair Labor Standards Act (“FLSA”) to determine whether they were in need of revision having last been updated in 2004. Today the DOL announced a new proposed rule regarding the salary basis which applies to the executive, administrative and professional tests which employees must meet in order to be exempt from the minimum wage and overtime requirements of the FLSA. This exception to overtime eligibility was originally meant for certain highly-compensated or white collar workers.
An employee’s salary level was typically viewed as the best test of exempt status. However, the current minimum salary level required for the exemption is $455 per week or $23,660.00 per year. If an employee meets that test, then his or her duties are evaluated to determine whether the job itself is of the type which should be considered exempt. Also, under the current rule, certain highly compensated employees, those making a salary of $100,000.00 per year or more, are automatically exempt.
The proposed revision would increase the salary threshhold to $921 per week or $47,892.00 per year. The DOL also proposes to raise the threshhold for a highly compensated employee to $122,148.00 per year. The department estimates that these changes would extend overtime protections to nearly 5 million white collar workers within the first year of its implementation. Finally, the proposed rule would automatically update the standard salary and compensation levels annually “to make sure that they maintain their effectiveness,” either by maintaining levels at a fixed percentile of earnings or by updating amounts based on changes to the CPI-U.
What the DOL did NOT do is make specific proposals to modify the standard duties tests, something which was expected. Rather, the department is seeking comments on whether the tests are working as intended to screen out individuals who are not appropriately classified as executive, administrative or professional employees.
So what happens next? As soon as the proposed rules are published in the Federal Register, a comment period of sixty days begins. Interested parties may submit comments electronically through the Federal eRulemaking Portal at http://www.regulations.gov. Comments by mail should be addressed to Mary Ziegler, Director of the Division of Regulations, Legislation, and Interpretation, Wage and Hour Division, U.S. Department of Labor, Room S-3502, 200 Constitution Avenue, N.W., Washington, D.C. 20210. It is expected that the DOL will receive comments from organized labor as well as any number of business and trade associations. Industries expected to be most affected by the proposed changes include retail and hospitality where managers often work long hours for low pay with many non-management responsibilities. Also likely to be impacted are businesses which employ individuals who might otherwise qualify as executive, administrative or professional based on their education and duties on a part time basis for reduced pay. In the rare week that such an employee works more than 40 hours, he or she could receive overtime pay at a rich hourly rate.